“Big pharma” and “biotech” are in the news these days.  Politicians attack the industry and the price of drugs.  At the same time, Pfizer, Johnson & Johnson, and others hurry along to develop a COVID vaccine.  These companies have been among the world’s most inventive, saving millions of lives with their products.  Due to their complex methods and long product names, pharmaceutical companies are difficult for those of us outside the industry to explore and explain.  In equally complex high-tech industries like aerospace and electronics, we can at least show product pictures.  In pharma, even pictures are of little help:

In the future, we hope to dive into the long history of the great prescription drug-makers.  At the end of this article, we’ve added two appendices:

  1. A chronology of some of the most important business developments (mergers and acquisitions) in the industry, which has been rife with “big deals” over the last two decades.
  2. An example of the evolution of one company, Pfizer.

Consumer Healthcare

But today, we focus on another side of the pill business: consumer healthcare, also called Over-The-Counter (OTC) drugs.  These are the thousands of pills and liquids we can buy without a prescription, that everyday make our lives better, from aspirin to Pepto-Bismol.

OTC is a $35 billion business (data from the Consumer Healthcare Products Association):

These OTC products have a longer and deeper history of consumer branding than do prescription drugs, which only started advertising in recent decades.  Perhaps we can learn something about branding and brand management from these remedies.

Thinking About Brand Management

Brands are a funny thing.  The great ones have a life of their own.  Tide and Coca-Cola seem to grow stronger with age.  Brands are born and brands die.  Where are Ipana and Pepsodent toothpastes today?  How about Pontiac and Oldsmobile, once leaders in their industry?  Even “industrial products,” like Douglas airliners and Mack trucks, rise and fall.  Others including Boeing and Deere persist. 

Companies give birth to and kill off brands for many reasons.  Often, companies buy and sell brands as if they were a stock in an investment portfolio, nothing more than a piece of paper.  The reasons companies keep or don’t keep brands include:

  • Slowing growth or shrinking market or market share.
  • Profitability below company standards or goals.
  • Bad fit with other products, different manufacturing or distribution systems.
  • Bad fit with management, which can also have a high turnover in some companies.

(We would love to compile the brand turnover – how often a company buys and sells brands – of each company.  Our research indicates that few if any people are looking at that metric.)

But are brands – and their consumers – well-served by having four different parent companies in twenty years, perhaps with ten different CEOs, each with a “new vision?”  We think that’s unlikely, except when a good old brand falls into the hands of someone who loves it and builds upon its past strengths.

Managing a brand, particularly mature ones like those discussed below, is an art form.  The managers of the best brands deeply understand their customers and how they perceive the brand, what it stands for.  (Here is a great story about the former CEO of Procter & Gamble, the company that pioneered brand management.)

The best brand managers use imagination to envision the brand’s future.  They take risks and try new things.  They see opportunities where others do not.  They combine the strengths that come from years of consumer familiarity with product and packaging improvements and “brand expansion.”  (Look at M&M candies the next time you are in a store to witness brand expansion.)  These managers believe in their brands so strongly that they will even stick with them through hard times.

Consumer Healthcare in the Historical Context of Big Pharma

If we go back to the 1960s, we find several big American companies that focused on OTC products.  American Home Products, Bristol-Myers, Warner-Lambert, and Sterling Drug were all large companies for the time.  Each made some prescription drugs, but far more of their sales came from OTC products, including Anacin, Bufferin, Listerine, and Bayer aspirin, respectively. 

All four companies more than doubled in size in the 1960s and most tripled their profits or better.  Most of them never had a down year in profits during that era.  They all had substantial international revenues.  And all four were good stocks to own and were widely held by investors of the time (though not the skyrocket stocks of the era like Xerox and SS Kresge, with its new Kmart stores).

Over the ensuing fifty years, these four companies decided to focus on prescription drugs.  Prescription drugs carried higher profit margins.  While sometimes as risky as drilling for oil (most new drug ideas never make it through the testing and approval process), the payoff on “blockbuster” drugs can be huge. 

(It is worth noting that, with the rise of genetic and other technologies, these big prescription drug companies have made many acquisitions.  They have often depended on those acquisitions for innovation rather than on their own research and development labs, as they did in the 20th century.  See appendix 2 on the history of Pfizer.) 

As these companies shifted from OTC to prescription drugs, they perhaps missed the balancing attributes of mass-marketed consumer products: 

  • The prices of patented prescription drugs drop precipitously when they come off patent and generic products come out.  On the other hand, trademarks like Tylenol and Listerine never die. 
  • Many drugs move from requiring a prescription to being freely available in OTC form.  When that happens, additional profits can be made if the company has marketing and distribution skills appropriate for OTC products, which are distributed very differently from prescription drugs. 
  • Demand for some of these products has slowed in developed countries, yet billions of people in “emerging markets” like China, India, Indonesia, and Brazil are becoming wealthy enough to afford toothpaste and headache pills. 

These OTC products require brand managers who see themselves as stewards of the brand.

In the table below, we list nineteen brands that existed in 1966, that still exist today, but have seen multiple owners.  Some of these items were shuffled from parent company to parent company.    

Note that British GSK (GlaxoSmithKline) has majority control of their big OTC joint venture with prescription giant Pfizer, which they intend to spin out as a separate company.  Then the GSK and Pfizer brands will be united in the new company, presently called GSK Consumer Healthcare.  Based on current revenues, this new company will vie with Johnson and Johnson to have the biggest global OTC business, with annual revenues of about $13 billion.  The German Bayer company and Cincinnati’s Procter & Gamble (P&G) are among the largest OTC medicine companies after those two.

It is fascinating that, while American Home Products, Bristol-Myers, Warner-Lambert, and Sterling Drug all moved out of OTC, some of their key competitors – GSK, Bayer, and Johnson and Johnson – did not.  They acquired more OTC brands and invested in them, seeing something the others did not see. 

The great P&G actually entered the business (they even dabbled in prescription drugs but realized their skills and distribution system were not a good fit).  Their brands like Pepto-Bismol and NyQuil have been well-tended, growing and gaining shelf space in drugstores since P&G bought them.

Johnson & Johnson (J&J) in particular has never wavered from their belief in OTC.  Their product Tylenol long led the “analgesic” field in the US, but now appears to be slightly behind GSK’s Advil, a brand GSK is picking up from Pfizer, which picked it up from American Home Products when Pfizer acquired AHP.  Band-Aids have never lost their leadership.  J&J was quick to grab Listerine, a Warner-Lambert product, when Pfizer parted with it.

At the same time, J&J steams ahead with their much larger prescription drug business.  The graphic below is the best data we could find on the top global companies in the prescription part of the industry, where J&J ranks third.

Which of these very different strategies – prescriptions only or a bigger focus on OTC – pays off best can only be known years into the future.  Those of us who admired the OTC giants of fifty years ago look forward to the evolution of GSK Consumer Health.  Will it show a growth and profitability record to rival that of the old American Home Products?  Only time will tell.  On the other hand, based on past history, it would be folly to expect anything but success from J&J and P&G.

Please post your comments and thoughts on this article here.

Gary Hoover
Executive Director
American Business History Center

Appendix 1: Chronology of Selected Key Pharmaceutical Industry Mergers and Acquisitions

This chronology yields some perspective on how much this industry has been reconfigured over the years.  Giants have risen and then gotten bought.  Perhaps six or seven different companies have held the title of America’s largest pharmaceutical company over the last hundred years.  We follow the chronology with another appendix showing the changes at one company, Pfizer.

  • 1918 Seventeen-year-old patent medicine (“snake oil”) company Sterling Products (later Sterling Drug) buys the American assets of German chemical giant Bayer after the federal government seizes the “alien” company’s assets during WW I.  For $5.3 million, Sterling gets Bayer aspirin in the US.  For the full story, see https://americanbusinesshistory.org/the-tortuous-saga-of-the-first-wonder-drug-aspirin/.
  • 1929 Two of the nation’s largest pharmaceutical makers, Baltimore-based HK Mulford and Philadelphia’s Sharp and Dohme merge, keeping the latter company’s name.
  • 1932 American Home Products, the result of a 1920s combine of several patent and other medicine makers, buys pharmaceutical maker Wyeth Chemical of Philadelphia from Harvard University.  The Wyeth family had left the company to Harvard two years earlier.
  • 1953 Merck, originally the US operations of the German pharmaceutical company of the same name (also taken from the Germans in WW I), buys Sharp & Dohme, for a while going under the name Merck, Sharp, and Dohme.
  • 1955 Consumer and prescription drug company Warner buys Listerine maker Lambert to form Warner-Lambert.
  • 1959 Surgical supply and Band-Aid maker Johnson & Johnson buys McNeil labs and its children’s painkiller Tylenol, which soon comes off prescription to become an OTC product for people of all ages.
  • 1970 Swiss chemical firms CIBA and Geigy combine their pharmaceutical operations to form Ciba-Geigy.
  • 1971 Another formerly German US pharmaceutical company, Schering, merges with Memphis-based marketing and OTC company Plough, which under Abe Plough had grown from a patent medicine company to include Coppertone and Maybelline.
  • 1976 In an effort to expand in prescription drugs, Warner-Lambert buys what had in the past been the biggest US pharmaceutical company, industry pioneer Parke, Davis of Detroit.
  • 1979 The German Bayer company buys Miles Laboratories, Elkhart, Indiana-based maker of Alka-Seltzer, Bactine, and One-A-Day Vitamins.
  • 1982 Top US marketer Procter & Gamble enters the OTC business by buying Norwich-Eaton, makers of Pepto-Bismol and Chloraseptic.
  • 1985 Monsanto buys Chicago drug company Searle.
  • 1985 Procter & Gamble buys Richardson-Vicks, makers of Oil of Olay, Clearasil, Vicks, and NyQuil.
  • 1988 In a failed effort to diversify, Eastman Kodak buys Sterling Drug (Bayer Aspirin, Anacin, many others).
  • 1989 American Home Products buys AH Robins after Robins went bankrupt.  Robins had made the dangerous Dalkon Shield female contraceptive (IUD).  Of the $3B that American Home paid, $2.5B was reserved to settle Dalkon Shield lawsuits.  Robins also made Robitussin and Chapstick.
  • 1989 Bristol-Myers, another OTC health company (Bufferin, Ipana toothpaste, etc.) expands its prescription drug business by buying a key early US pharmaceutical company, ER Squibb, dating from 1858 in Brooklyn.  Company is renamed Bristol-Myers Squibb.
  • 1989 American pharmaceutical company SmithKline Beckman merges with British Beecham (big in OTC products) to form SmithKline Beecham.
  • 1993 British chemical giant ICI spins out its pharmaceutical business, naming it Zeneca.
  • 1994 American Home Products, expanding its role in prescription drugs and vaccines, buys American Cyanamid and its Lederle Laboratories.
  • 1994 French Sanofi buys the Sterling Drug prescription business from Eastman Kodak.
  • 1994 SmithKline Beecham buys the Sterling Drug OTC business from Eastman Kodak, including Bayer aspirin in the US.
  • 1994 Bayer pays SmithKlineBeecham $1B for the US operations of Sterling, finally getting its baby (Bayer aspirin) in the US back, along with Anacin and other OTC products.  SmithKlineBeecham keeps Sterling’s big international operations (but not Bayer aspirin).
  • 1994 Swiss pharmaceutical giant Roche buys birth control pioneer Syntex.
  • 1995 British pharmaceutical company Glaxo buys fellow British competitor Wellcome (Burroughs-Wellcome) to form Glaxo Wellcome.
  • 1995 Two pharmaceutical companies, Sweden’s Pharmacia and Kalamazoo, Michigan’s Upjohn, merge to form Pharmacia & Upjohn.
  • 1996 Swiss companies Ciba-Geigy and Sandoz merge.  Their pharmaceutical operations form a new company named Novartis.
  • 1999 Swedish Astra merges with British Zeneca to form AstraZeneca.
  • 1999 Aventis is created from the merged pharmaceutical businesses of two chemical companies, Hoechst of Germany and Rhone-Poulenc of France.
  • 2000 US pharmaceutical giant Pfizer buys Warner-Lambert.
  • 2000 Pharmacia & Upjohn buys the pharmaceutical business Searle from Monsanto.
  • 2000 British firms Glaxo Wellcome and SmithKline Beecham merge to form GlaxoSmithKline, known as GSK.
  • 2001 GSK buys American Block Drug, makers of Polident and Sensodyne.  (An heir to Block Drug financed and co-founded the Woodstock Musical festival in 1969.)
  • 2002 American Home Products, increasingly focused on prescription drugs, renames itself Wyeth after its prescription division.
  • 2003 Pfizer continues its big acquisition spree by buying Pharmacia and Upjohn, including Motrin and other OTC drugs.
  • 2004 Swiss Sanofi and French-German Aventis merge, renamed Sanofi-Aventis.
  • 2006 Pfizer decides to exit the OTC business, selling its many acquired OTC businesses, including Listerine, to Johnson & Johnson.
  • 2009 Merck acquires Schering-Plough, including Coppertone and other OTC businesses.
  • 2009 Pfizer makes its biggest acquisition yet, buying Wyeth, formerly American Home Products, including its big OTC business for $68B in one of the biggest deals in business history up to that time.
  • 2009 Swiss Roche buys American Genentech.
  • 2010 Sanofi-Aventis buys Chattem of Chattanooga, Tennessee, one of the great old patent medicine companies, including Gold Bond Medicated Powder. (See the historic link between Chattem and Coca-Cola here.)
  • 2011 Renamed Sanofi, the company buys American Genzyme.
  • 2013 Pfizer combines its animal pharmaceutical businesses into a new company, Zoetis, and spins it out.  Zoetis then continues to buy up other animal medicine companies.
  • 2013 Chicago’s Abbott Labs spins out its research-based prescription drug operations into a new company, AbbVie.
  • 2014 German Bayer buys American Merck’s OTC businesses.
  • 2018 GSK buys partner Novartis’s share of their joint venture OTC business, taking Novartis out of OTC.
  • 2018 GSK buys control of their OTC joint venture with Pfizer, marking the second time Pfizer decides to get out of OTC to focus on prescriptions.  GSK plans to spin the new business out as independent company in a few years.  This will be one of the two largest OTC companies in the world, alongside J&J, unless there are other big mergers.  (GSK is led by a very interesting woman.)
  • 2019 Bristol-Myers Squibb buys Celgene.

(Note that the only big US historic pharmaceutical company not mentioned above is Eli Lilly of Indianapolis, which has made smaller acquisitions but never had the desire to be the biggest, as did Pfizer.)

(Note that the only big US historic pharmaceutical company not mentioned above is Eli Lilly of Indianapolis, which has made smaller acquisitions but never had the desire to be the biggest, as did Pfizer.)

Appendix 2: An Example of the change at one company, Pfizer, from Wikipedia (unedited)

The other big players in pharma often have similarly complex and ambitious histories.

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